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The housing bust turned more renters and homeowners into neighbors

Courtesy of Flickr user <a href="">Christopher Sessums</a> under a Creative Commons license.

The housing bust blurred one of the distinctions that we often use to define and divide ourselves: whether we're homeowners or renters. In the midst of the crash, longtime homeowners suddenly became renters (some of them even in their own homes). And many longtime renters suddenly concluded that they might not want to own after all.

Single-family houses that were owned for years appeared overnight on the rental market. Wall Street investors who made millions off of mortgage-backed securities began to dabble in rental properties instead. And neighborhoods that were once entirely home to homeowners gradually became less homogenous.

All of these forces have challenged some of the assumptions built into the renter-owner divide: that everyone should aspire to own a home, that we're all better off when people do, that homeownership creates citizenship, while renters make bad neighbors.

In a less theoretical sense, these forces have also begun to push homeowners and renters closer together. Jed Kolko, the chief economist at Trulia, recently ran a thoughtful analysis of how mixed the two groups have become in American metros. Borrowing from a technique often used to measure racial segregation — an index of dissimilarity — Kolko compared Census data between 2000 and 2010 looking at the distribution of renters and owners across metropolitan areas.

Such an index measures the share of owners or renters who would have to move to a different Census tract within town to achieve perfect integration. A score of 1 reflects a metropolitan area where renters and homeowners are completely separated, each living in their own Census tracts. A score of 0 would capture a metro where every neighborhood has a mix of renters and owners comparable to the makeup of the entire community.

Not surprisingly, as the national homeownership rate has declined, and as homes that were traditionally owned became rentals, Kolko found that owners and renters became more integrated between 2000 and 2010 in 70 of the 100 largest metros in the country. This trend was driven by the decline of neighborhoods where nearly everyone owns a home, and the steady rise of the kind of Census tracts where 20-60 percent of households are rented:

This trend was also strongest in those places — like Las Vegas, Phoenix and Sarasota — that experienced that most dramatic declines in housing prices. These are the markets where institutional investors bought up many foreclosed single-family homes and turned them into rental properties. "In fact," Kolko writes, "between 2000 and 2010, the change in renter‐owner integration was strongly correlated with the severity of the housing bust."

This implies that our new-found owner-renter integration will probably recede after the housing market fully recovers, once demand for for-sale housing rises and once investors begin to offload these rental properties (if you believe that permanent changes are afoot in American preferences for homeownership, you may disagree with this). But in the meantime, this newer reality — picture low-density, single-family neighborhoods dotted with rentals that look architecturally indistinguishable from the owned homes — raises some interesting questions about what it means for owners and renters to live side-by-side.

On the one hand, this means that people who are renters now have neighborhoods open to them that weren't in the past. On the other, Kolko points to a Trulia survey last year that found that 51 percent of homeowners believe it's important that their neighbors be homeowners, too. In other words, renters may not always be welcome, as the New York Times described in a story last summer about formerly owner-occupied neighborhoods changing in "profound ways," portending "reduced home values, lower voter turnout and political influence, less social stability and higher crime."

Kolko's data suggest that few places are dramatically flipping from all-owner to all-renter. But even a much subtler change can still bring out anxieties grounded in all of the beliefs we've long held about each other. I'm not sure what this proximity will teach most of us — that some of the values associated with homeownership might rub off on nearby renters? That homeowners have less (or more) to fear from renters in the midst than they think? That our financial relationship to our homes matters less than it used to?

If you're living this relationship from either side, please tell us about it. Below, for further fodder, I've also included some of Kolko's 2010 data on many of the largest metros in the country for comparisons between them (scroll down within the box).